ELEVEN-year bonds gained for the first time in three days after yields at the highest level in two months attracted buyers.
Banks parked an average of $9.2 billion daily with the central bank this month, reflecting an easing of the cash crunch that saw them borrowing an average Rs 82,000 crore from the Reserve Bank of India in March. The wholesale price index probably rose 8.36 per cent from a year earlier last month, after gaining 8.31 per cent in February, according to a Bloomberg News survey before an April 15 government report.
“Bonds are higher, as these are probably good levels to buy; liquidity has also improved,” said R S Chauhan, chief dealer of fixed-income and currency at State Bank of Bikaner & Jaipur in Mumbai said. “But inflation concerns may keep gains in check.”
The yield on the 8.13 per cent note due September 2022, the most-traded government debt, fell three basis points, or 0.03 percentage points, to 8.15 per cent as of 9:48 am, according to the central bank’s trading system. The market was closed yesterday for a local holiday. The central bank, which has boosted borrowing costs eight times since March 2010 to damp inflation, next meets to review interest rates on May 3.
RUPEE DOWN
The rupee weakened for a second day on speculation a recent slide in the benchmark stock index will prompt overseas investors to reduce their holdings of the nation’s shares.
The currency touched the lowest level in almost a week after the Bombay Stock Exchange’s Sensitive Index fell for five days through April 11, before India’s financial markets were shut on Tuesday for a public holiday. The index rebounded 0.5 per cent on Wednesday. Most regional currencies fell on concern the after-effects of Japan’s worst earthquake on record will slow global economic growth and damp demand for emerging-market assets.
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“The outlook for equities is looking more pessimistic after the recent slide in stocks and that is weighing against the local currency,” said Roy Paul, deputy general manager at Federal Bank Ltd in Mumbai. “The rupee dropping may become a trend in the coming days.”
The rupee declined 0.3 per cent to 45.53 per dollar as of 9:47 am in Mumbai, from April 11, according to data compiled by Bloomberg. It touched 44.593, the weakest since April 7. The currency may drop to 45.85 this week, Paul forecast. Offshore forwards indicate the rupee will trade at 45.21 in three months, compared with expectations of 45.03 on April 11. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
CALL RATES EDGE UP CALL
rates ended slightly higher at 6.85 per cent at the overnight call money market here on Wednesday on mild demand from borrowing banks. The overnight call money rate finished higher at 6.85 per cent from Monday's closing level of 6.80 per cent. It moved in a range of 6.95 per cent and 6.75 per cent.